Investment firm HG Vora Capital Management has filed a lawsuit against Penn Entertainment, accusing the company of violating federal securities laws and breaching its fiduciary duties after it reduced the number of board seats up for election from three to two ahead of its 2025 annual meeting.
The suit, filed Monday in the U.S. District Court for the Eastern District of Pennsylvania, seeks declaratory and injunctive relief to invalidate what HG Vora calls Penn’s “Board Reduction Scheme.” The firm argues that the move was an illegitimate attempt to sideline shareholder influence during a contested election.
The dispute comes as Penn faces pressure over its underperforming ESPN Bet sports betting platform, a key flashpoint in HG Vora’s push for boardroom change.
Penn did not respond to a request for comment by publication.
HG Vora: Penn misled shareholders
Penn has defended the decision to reduce the number of open board seats, with documents filed in its proxy materials stating the change was consistent with the company’s bylaws.
HG Vora, which owns approximately 4.8% of Penn’s outstanding common stock, argues that Penn misled shareholders in proxy statements filed with the SEC and failed to comply with new universal proxy rules.
The investor is asking the court to force Penn to correct “materially false and misleading” proxy materials and reinstate a third seat up for election, allowing shareholders to vote on all three of HG Vora’s proposed nominees.
Disputed timeline and missed expectations
Tensions escalated last month when Penn’s board informed HG Vora it would hold an election for three seats at the June 17 annual meeting. That same week, however, Penn revised its position and reduced the number to two.
In an April 28 report, HG Vora detailed its objections, claiming the last-minute change came after conversations between the two that made it clear all three of its nominees were likely to win shareholder support.
HG Vora previously disclosed that it had met with Penn CEO Jay Snowden in December 2023 to discuss placing two independent directors on the board following what it called a “complete failure” of Penn’s interactive strategy, including ESPN Bet.
Repercussions for ESPN Bet
HG Vora’s campaign marks the first time in its 16-year history that it has nominated directors at a portfolio company. In January, founder Parag Vora criticized Penn’s board for “reckless spending” on sports betting ventures and “overpaying, overpromising, and not delivering.”
Penn’s ESPN Bet brand has failed to gain meaningful market share since its launch in November 2023. In a proxy statement, Penn acknowledged that “market share and financial performance in sports betting has not met our expectations,” while stating it is committed to improving execution with ESPN. Still, Penn has preserved optionality in the deal, which either side can terminate on its third anniversary in August 2026.
HG Vora has emphasized that it is not seeking control of the company but rather advocating for improved oversight.
“There have been no repercussions for the Board’s persistent bad judgment and disappointing shareholder returns,” HG Vora wrote. “Change is urgently needed to address these failings.”
